NEW YORK (TheStreet) -- Guidewire Software Inc. (GWRE) - Get Report was upgraded to "neutral" at Citi Group (C) - Get Report on Tuesday as the firm thinks the company's fundamentals are improving.

"We are upgrading shares of Guidewire...following a 30%+ pullback from early March highs. We have consistently held a positive view of Guidewire's market position and believe broader adoption of InsuranceSuite as a key driver to growth. We expect Q3 will show re-acceleration in license and momentum is likely sustainable into Q4," Citi said.

Separately, TheStreet Ratings team rates GUIDEWIRE SOFTWARE INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

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"We rate GUIDEWIRE SOFTWARE INC (GWRE) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 116.2% when compared to the same quarter one year ago, falling from $5.50 million to -$0.89 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, GUIDEWIRE SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of GUIDEWIRE SOFTWARE INC has not done very well: it is down 5.04% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • GUIDEWIRE SOFTWARE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GUIDEWIRE SOFTWARE INC reported lower earnings of $0.24 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($0.38 versus $0.24).
  • The gross profit margin for GUIDEWIRE SOFTWARE INC is rather high; currently it is at 55.55%. Regardless of GWRE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GWRE's net profit margin of -1.06% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: GWRE Ratings Report

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